A recent members-lunch hosted by the Chartered Alternative Investment Analyst (CAIA) Association featured a presentation by the managing director of one of India’s largest private equity and real estate investment firms.  That got us wondering about the state of the alternative investment industry in the world’s largest democracy.  So we invited James Burron, CAIA of ICICI Wealth Management to give us the scoop on hedge funds, private equity and real estate in India as part of our monthly guest column by a member of the CAIA Association.

James works with a full spectrum of alternative investments for ICICI Bank – India’s second largest bank.  A Canadian, James was Director of Alternative Investments with a Seoul, Korea-based investment firm before moving to Toronto to work in structured products.  He is currently a product manager for the firm’s Canadian operation – its second largest after the UK.

Alternative Viewpoints: Alternative Investments in India

Special to AllAboutAlpha.com by: James Burron, CAIA, Product Manager, ICICI Wealth Management

For many investors, India evokes images from Kim, Gandhi or, more recently, Slumdog Millionaire and Bombay Calling. India is all at once a country of extraordinary poverty (with an estimated 41% of the world’s poor) and highly concentrated wealth (Mukesh Ambani, worth an estimated $50 billion, is completing work on his $1 billion home in Mumbai).  Seen by some as a step behind China, the lowest existing estimate for FY 2009 growth is about 6.5%, a far cry from the zero to negative growth expected in many other countries. India has a history of British-rule and central government control, but is populated by brash, young entrepreneurs working either in call centres, IT firms or Small and Medium-sized Enterprises (SMEs).

As far as alternatives go, the market for (and of) alternative investments is growing slowly as the Securities and Exchange Board of India (SEBI, regulating securities) and the Reserve Bank of India (RBI, regulating banking) are starting to allow various new products into India.

Hedge Fund Regulation

To know India is to know regulation.  And regulation is a good thing, because before hedge funds were regulated, they were simply excluded from the country.  Both major regulators are ill-at-ease with hedge funds in general.  As a result, hedge funds have gone through 4 distinct phases in India: prohibition, More…